The views contained here may not represent the views of 24hGold, its affiliates or advertisers.

24hGold.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including, editorials, news, prices, statistics, analyses) provided through its service. In no event shall 24hgold.com, its affiliates or advertisers be liable to any person for any decision made or action taken in reliance upon the information provided herein.

Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of 24hGold.com, is strictly prohibited.

We read political and economic news reports like any investors does,
but we also look for source data ourselves on important subjects. It's fine
to let reporters gather information for us, but what we do with that
information, and what happens if we trust it blindly, is our own
responsibility. There are risks.

A case in point is the recent Bloomberg
report that Russia has
become the world's biggest gold buyer. That may be
true according to current official numbers, but official numbers are not
always accurate – and in China's case, they have not been updated since 2009.

So, BIG GOLD
Editor Jeff Clark did a little thinking and research of his own on the
subject, coming to a strikingly different conclusion than Bloomberg reached. Now, we
like the Bloomberg
team, and think they do an above average job – and their numbers may even be
officially right – but that doesn't make the picture they painted with them
accurate.

As always, caveat
emptor.

One more quick note: Casey Research Chief
Economist Bud Conrad and our Jeff Clark will be speaking at the upcoming
Sovereign Society Currency Expo, April 5-7 in San Diego, California. It has a
great lineup of other speakers as well, many of whom I've heard address the
issues that are most critical in the markets today. Since Casey Research is
not having a spring summit this year, this might be just the ticket for
staying up to speed on the latest developments. See the Sovereign Society web page for details.

Sincerely,

Louis James
Senior Metals Investment Strategist
Casey Research

Bloomberg Gold
Report Misses the Mark

By Jeff Clark, Senior Precious Metals Analyst

Bloomberg reported last week that Russia is now the world's
biggest gold buyer, its central bank having added 570 tonnes
(18.3 million troy ounces) over the past decade. At $1,650/ounce, that's
$30.1 billion worth of gold.

Russia isn't alone, of course. Central banks as a group have been net
buyers for at least two years now. But the 2012 data trickling out shows that
the amount of tonnage being added is breaking records.

The following table lists the countries that have added to their gold
reserves this year, while the second one tallies those that have been
selling. You'll see how recently each country has reported, along with its
percentage increase.

Changes in Central Bank Gold
Reserves in 2012 (Million Troy Ounces)

Year-End 2011

YTD
2012

Last
Reported

Net
Change

Percent
Change

Countries IncreasingReserves

Turkey

6.28

11.56

Dec

5.283

84.1%

Russia

28.39

30.79

Dec

2.405

8.5%

Bank for International Settlements

15.6

16.71

Dec

1.114

7.1%

Brazil

1.08

2.16

Dec

1.08

100.0%

Philippines

5.12

6.2

Nov

1.079

21.1%

Kazakhstan

2.64

3.71

Dec

1.07

40.5%

South Korea

1.75

2.71

Nov

0.965

54.9%

Iraq

0.19

0.96

Nov

0.773

405.3%

México

3.41

4

Dec

0.596

17.3%

Paraguay

0.021

0.263

Sept

0.242

1152.4%

Ukraine

0.9

1.14

Dec

0.239

26.7%

Belarus

1.21

1.37

Dec

0.164

13.2%

Tajikistan

0.15

0.2

Dec

0.05

33.3%

Brunei

0.06

0.09

Oct

0.031

50.0%

Mozambique

0.08

0.11

Oct

0.025

37.5%

Serbia

0.46

0.48

Nov

0.022

4.3%

Jordan

0.41

0.43

May

0.02

4.9%

KyrgyzRepublic

0.08

0.1

Dec

0.014

25.0%

Greece

3.59

3.6

Dec

0.008

0.3%

Mongolia

0.11

0.12

Nov

0.004

9.1%

Suriname

0.071

0.074

Dec

0.003

4.2%

South Africa

4.02

4.02

Nov

0.003

0.0%

Moldova

0

0.002

Dec

0.002

Bulgaria

1.28

1.28

Dec

0.001

0.0%

Pakistan

2.071

2.072

Dec

0.001

0.0%

Subtotal Gross Increases

15.2

Changes in Central Bank Gold
Reserves in 2012 (Million Troy Ounces)

Year-End 2011

YTD
2012

Last
Reported

Net
Change

Percent
Change

Countries DecreasingReserves

Sri Lanka

0.32

0.12

Sept

-0.204

-62.5%

Germany

109.19

109.04

Dec

-0.159

-0.1%

CzechRepublic

0.4

0.37

Dec

-0.028

-7.5%

Macedonia

0.22

0.22

Dec

-0.001

0.0%

France

78.3

78.3

Dec

-0.001

0.0%

Malta

0.01

0.01

Dec

-0.001

0.0%

Subtotal Gross Decreases

-0.39

Total Net Change

14.8

Sources:
IMF, CPM Group. Data as of 1-31-13.

Based on current data, the net increase in central bank gold buying
for 2012 was 14.8 million troy ounces – and that's before the final 2012
figures are in for all countries.

This is a dramatic increase, one bigger than most investors probably
realize. To put it in perspective, on a net basis, central banks added more
to their reserves last year than since
1964. The net increase – so far – is 17% greater than what was
added in 2011, which was itself a year of record buying.

Here's a picture of total central bank reserves since the financial
crisis hit.

(Click on image to enlarge)

Whatever gold's price movements, positive or
negative, central bank officials have continued adding a lot of ounces to
their reserves.

But this understates the case, because most of the data exclude China,
as well as a few other small countries. China last officially reported gold
reserves in 2009, so the totals in the chart since then exclude whatever its
purchases might have been.

Here's where it gets interesting: Bloomberg
claimed that Russia has been a bigger buyer of gold over the past decade than
China – by a full 25%. Based on data about gold imports through Hong Kong and
the fact that, for the most part, Chinese production doesn't leave the
country, it seemed to me that this could not be right.

The Chinese central bank holds an official 1,054 tonnes
of gold in its reserves. Bloombergstates, based on IMF data, that China has added
somewhere around 425 tonnes over the past decade.

I can't say exactly what the correct number is, but the Bloomberg number almost has
to be wrong. Here'swhy:

Gold imports through Hong Kong in December
alone hit a record high of 109.8 tonnes.

Imports for 2012 also hit a record high of
572.5 tonnes.

If you add 2012 mine production – remember that
China is now the world's largest gold producer – roughly 970 tonnes of gold was delivered to various entities
within the country last year.

Cumulative imports since 2001 have reached
1,352 tonnes.

Since 2001, imports plus production total a
whopping 4,793 tonnes.

So Bloomberg
is essentially saying that roughly 10% of the total gold available inside the
country during that period was added to China's reserves. While it's true
that Chinese citizens are buying a lot of gold (though perhaps more silver),
it's highly doubtful that private parties bought 90% of all the gold brought
to the Chinese market during this period. I think – but can't prove – that
China's central bank is buying more gold and at a faster pace than its
Russian counterpart.

Jim Rickards, a highly respected author and
hedge fund manager, said last month that China has probably already
accumulated between 2,000 and 3,000 tonnes of
additional gold reserves. If he's right, that would be roughly double or
triple the 1,054 tonnes it reported in 2009 – not
the 40% increase Bloomberg's
numbers suggest.

At the very least, we can say that the Bloomberg report left consideration of China's
imports and production out of its report naming Russia the top gold buyer of
2012. Okay…but so what?

Well, Jim thinks the next big catalyst for gold will be an
announcement from China about its reserve position. Here's what he told me in
late December (which we reported in the January issue of BIG
GOLD, my
precious-metals advisory).

"The catalyst for a spike into the $2,500 to $3,000 price range
for gold will be an announcement by China, probably in late 2013 or 2014,
that they have acquired 4,000 tonnes or more in
their official reserve position. This will put China on an equal footing with
the US in terms of a gold-to-GDP ratio, and validate gold as the real
foundation of the international monetary system. Once that position is
validated, gold will move to the $7,000 range in 2015 and beyond."

Even if Jim's estimate is high or China doesn't make an announcement
until later, it's clear that central banks around the world are buying gold
in record quantities.

It almost makes you wonder… do they know something we don't?

The Russians gave us some hints.

EvgenyFedorov, a lawmaker for Putin's United Russia Party, said
last week, "The more gold a country has, the more sovereignty it will
have if there's a cataclysm with the dollar, the euro, the pound, or any
other reserve currency."

President Vladimir Putin told his central bank not to "shy
away" from the metal, adding "After all, they're called gold and
currency reserves for a reason."

The Chinese have been quiet on this topic recently, after being very
vocal a few years ago. Here's a recent quote.

"The current international currency system is the product of the
past," said Hu Jintao, General Secretary of the Communist Party of
China.

Others have provided clues as well.

"We're in the midst of an international currency war," said
Guido Mantega, finance minister of Brazil.

"Quantitative easing also works through exchange rates… The Fed
could engage in much more aggressive quantitative easing, to further lower
the dollar," said Christina Romer, former
chair of the Council of Economic Advisors.

Economist Kyle Bass recently spoke to a senior member of the Obama
administration about its planned solutions for fixing the US economy and
trade deficit. When he asked, "How are we going to grow exports if we
won't allow nominal wage deflation?", the
answer he got was, "We're just going to kill the dollar."

Yes, we're talking about the US dollar. Perhaps some investors have
gotten complacent about the risks to the world's reserve currency – but not
central bankers. It's not hard to see why: whether they admit it or not,
central bankers must know what it means to run the printing presses the way
the US has since 2008, even if price inflation is not immediately obvious.
It's no surprise they want to hedge their bets, moving more reserves into
something with actual value... something that can't be debased by a few
computer keystrokes by an increasingly unfriendly government.

The US dollar has been the world's reserve currency since WWII. That's
beginning to change, and the movement into gold is just one facet of that
change. The buying by central banks is exactly what one would expect to see
as we approach the end of the dollar hegemony.

The message from central banks is clear: they expect the dollar to
move inexorably lower. It doesn't matter that it's been holding up against
other currencies or that the economy might be getting better. They're buying
gold in record amounts because they see a significant shift coming with the
status of the dollar, and they need to protect themselves against that risk.

This leads to a second message: gold is not overpriced, in spite of
the 500%+ increase since 2001. Indeed, with the recent correction, central
banks are likely buying more, even as you read this.

Central bank gold buying will continue, of that we're certain. Even
after Putin's binge, gold accounts for only 9.5% of Russia's total reserves.
China's 1,054 tonnes is roughly 2% of its reserves.
It's clear that both countries, along with others, have decided to accumulate
as much gold as they can, as quickly as they can, before the dollar's decline
becomes more pronounced... and permanent. This could explain why some central
banks don't publicize their purchases. It also means that Bloomberg and other mainstream
media outlets could be caught off guard when China announces higher gold
reserves than expected – perhaps much higher.

Clearly we should take notice. If
central banks are preparing for a major change in the value of the dollar,
shouldn't we? The fact remains that the US dollar cannot and
will not survive the ongoing abuse heaped upon it by government planners and
federal officials. That not only means the gold price will rise, but that
many, if not most currencies, will lose a significant amount of purchasing
power. This has direct implications for all of us.

Embrace the messages central bankers are telling us – the ones they
tell with their actions, not their words. Buy gold. Your financial future may
very well depend upon it.

Gold and Silver HEADLINES

The World Gold Council released its Gold
Demand Trends report last week. Particularly strong demand in the
fourth quarter of 2012 (41% year-on-year) allowed India to preserve its
status as the #1 gold consumer, though China is getting close, trailing by
only 88 tonnes (2.8 Moz)
over the full year.

Global gold demand fell back by 3.9% to 4,406 tonnes
(141.6 Moz), although in
value terms it hit an all-time high of US$236.4 billion. Full-year demand
from India was down 12% from the previous year, which was not unexpected
considering the challenging domestic economic conditions and the political
will to curb gold demand within the country by raising duties. China's
year-on-year demand was flat, reflecting the impact of economic slowdown.
Central bank purchases rose by 17% over 2011, totaling 534.6 tonnes (17.2 Moz), the highest level since 1964, as our lead article points
out. Global investment in ETFs in 2012 thrived, rising 51% over the preceding
year. The average price of gold in 2012 was $1,669/oz,
up 6% from $1,571.5/oz in 2011. Gold demand in
terms of volume fell, though that's likely because the average price was
higher.

Gold demand results for 2012 were impressive, considering the price
has remained below its all-time high set in 2011. The amount of money spent
on the yellow metal continues growing and shows that interest remains strong.

Editor's Note: WGC and IMF estimates of central bank reserves
often differ, so these are different from what was mentioned in the Bloomberg article
referenced above. We tend to place greater weight on the WGC numbers.

The Australian minerals resource rent tax (MRRT) hasn't exactly lived
up to its creators expectations so far. It raised only A$126 million in the
first six months since introduction – a far cry from the expected full-year
revenue of A$2 billion. The Australian opposition criticized the country's
Treasurer Wayne Swan for spending more than the tax is making by saying,
"you are almost in idiot territory if you're spending the money ahead of
its receipt!"

In response, Swan blamed the current commodity weakness for the lower-than-expected
revenues, which hardly explains the shortfall.

We wish more governments that were so willing to tax
"excess" mining profits would face reality and realize the
unintended consequences of their greedy actions. Will the lower tax and
royalty revenue they receive make them reconsider their assumptions of how
profitable mining companies really are? We shall see.